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3/12/2013

Debt Has Soared by $5.5T Since Last Senate Budget

If you want a sense of just how massive the nation's debt problem is, consider this: The U.S. added $226 billion in new debt in just the 35 days since President Obama missed the legal deadline to submit his budget.

That's more than the government will spend this year on education, homeland security, law enforcement, housing aid, energy and the environment, combined.

A 1921 law requires the president to submit his budget plan to Congress on the first Monday in February, but Obama so far hasn't produced one, and the White House says it won't release its plan to get the nation's deficits and debt under control until sometime in April.

Senate Democrats, meanwhile, haven't produced an annual budget — also required by law — since 2009. Over that time, the nation's debt has climbed $5.5 trillion, according to the Treasury Department.

Senate Budget Committee Democrats are now promising to introduce a budget plan this week.

April Fools?

Obama initially claimed the holdup on his fiscal year 2014 budget was the last-minute "fiscal cliff" deal, which required them to redo their budget figures.

That agreement let the Bush tax cuts expire for people with incomes over $400,000, while making the rest of the lower Bush tax rates permanent. It also extended unemployment insurance, put off the automatic sequester spending cuts by two months, and let the Social Security payroll tax break expire.

"Because these issues were not resolved until the American Taxpayer Relief Act was enacted on Jan. 2, 2013, the administration was forced to delay some of its FY 2014 budget preparations, which in turn will delay the budget's submission to Congress," Jeffrey Zients, a director at the White House Office of Management and Budget, wrote to House Budget Committee Chairman Paul Ryan in mid-January.

But the fiscal cliff deal delayed by just one day the Congressional Budget Office's annual report, which also had to account for all those fiscal cliff changes. The CBO budget and economic outlook report came out on Feb. 5.

The budget holdup comes as Obama and Democrats try to figure out how to deal with the nation's debt crisis while protecting their favored spending programs and claiming only to want to raise taxes on the "rich."

Meanwhile, Obama has been talking up a grand bargain again with Republicans, trading entitlement reforms for more tax hikes, before releasing his own detailed plan on how he would do it.

During the 2012 campaign, Obama told voters that all America needed to get its deficits under control was to ask the rich to pay "a little more so we can pay down our debt in a balanced way."

After he won re-election, he talked as though the debt crisis was nearly solved. At a press conference early this year, he said the only thing left to do was "closing some additional loopholes (and) doing some additional cuts."

But the latest CBO report makes it clear that the debt crisis is far from over, despite an intervening $620 billion tax hike on the wealthy that Obama secured as part of the fiscal cliff deal.

The CBO projects that under current law, deficits will fall for the next two years, then start climbing again. By 2023, red ink will be near $1 trillion again.

And debt as a share of the economy will start climbing as well, starting in 2018. The CBO predicts that just publicly traded federal debt will reach 77% of the economy in a decade's time. Debt averaged just 41% of GDP from 1948 to 2008.

Entitlements Key

Obama has also said he will consider only modest changes to Medicare and Medicaid, and wants hands off Social Security. Leading congressional Democrats have vowed to fight any significant changes to entitlements.

But the CBO also makes clear that these programs must be ad dressed: "Unless the laws governing those programs are changed," it noted, "debt will rise sharply relative to GDP after 2023."

With Ryan promising a plan that not only cuts the deficit without more tax hikes but also produces a balanced budget in a decade, the debate over spending, taxes and the national debt is about to get very interesting.